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Only slow improvement in EU economy

Economic growth in both the EU as a whole and the euro area is likely to remain weak for the next two years, according to the EU Commission’s autumn economic forecast.

Economic growth in both the EU as a whole and the euro area is likely to remain weak for the next two years, according to the EU Commission’s autumn economic forecast. Forecasts have been revised down from the last report, following lower-than-expected economic growth on the back of weak domestic demand and persistent unemployment. This is expected to continue to affect consumer confidence and demand, with shoppers still favouring cheaper meats and cuts. The only slow economic improvement in the EU contrasts with the strong rebound in the US economy including in domestic demand.

For the largest economy in the EU, economic growth in Germany in 2015 and 2016 is expected to improve following a weak performance this year, with the support of growing domestic consumption and improved export performance. The labour market is predicted to benefit from supportive government policies, which will help lower unemployment and drive wage growth. These are expected to support consumption trends and an increase in household spending.

France’s economy has been weak since mid-2011, with only moderate growth expected over the next two years. Domestic demand has been constrained. Job creation has been low although expected to improve but consumer confidence is likely to remain low, which will affect shopping preferences.

Italy has experienced another year of recession although both the economy and domestic demand are expected to record modest growth next year. However, unemployment is expected to remain at high levels and household spending under pressure. Economic recovery in Spain is projected to gain momentum over the next two years, with improving consumer confidence and better labour market prospects. Domestic demand growth is the main driver behind this.

Growth in the UK economy is predicted to continue to be among the highest in the EU, driven by domestic demand. The labour market is expected to further improve and unemployment to fall. Household consumption growth is, however, expected to slow slightly as wage growth remains low and households appear likely to build on savings.